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The Effects of Exchange Rates on Employment in Canada

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Abstract

Under the flexible exchange rate regime, the Canadian economy is constantly af- fected by fluctuations in exchange rates. This paper focuses on the employment effect of the exchange rate in Canada. We find that appreciations of the Canadian dol- lar have significant effects on employment in manufacturing industries; such effects are mostly associated with the export-weighted exchange rate and not the import- weighted exchange rate. Meanwhile, the exchange rate has little effect on jobs in nonmanufacturing industries. Because the manufacturing sector accounts for only about 10% of the employment in Canada, the overall employment effect of the ex- change rate is small. In addition, we quantify the loss of manufacturing employment associated with a boom in the commodity market during which the Canadian dollar tends to appreciate. Our estimates suggest that when commodity prices increase by 15.77% (one standard deviation of annual change in commodity price between 1994 and 2010), Canada’s manufacturing employment decreases by 0.8%, about 0.08% of the total employment.

Suggested Citation

  • Haifang Huang, Ke Pang, Yao Tang, 2014. "The Effects of Exchange Rates on Employment in Canada," LCERPA Working Papers 0076, Laurier Centre for Economic Research and Policy Analysis, revised 29 Apr 2014.
    • Handle: RePEc:wlu:lcerpa:0076
    Note: LCERPA Working Paper No. 2014-8
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    References listed on IDEAS

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    1. Betts, Caroline M. & Kehoe, Timothy J., 2006. "U.S. real exchange rate fluctuations and relative price fluctuations," Journal of Monetary Economics, Elsevier, vol. 53(7), pages 1297-1326, October.
    2. Stoyanov, Andrey, 2009. "Trade policy of a free trade agreement in the presence of foreign lobbying," Journal of International Economics, Elsevier, vol. 77(1), pages 37-49, February.
    3. Haifang Huang & Ke Pang & Yao Tang, 2014. "Effects of Exchange Rates on Employment in Canada," Canadian Public Policy, University of Toronto Press, vol. 40(4), pages 339-352, December.
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    1. Haifang Huang & Ke Pang & Yao Tang, 2014. "Effects of Exchange Rates on Employment in Canada," Canadian Public Policy, University of Toronto Press, vol. 40(4), pages 339-352, December.
    2. Muhammad Shahid Hassan & Amna Kausar & Noman Arshed, 2022. "Investigating Export Determinants: A Time Series Evidence From Canada," SAGE Open, , vol. 12(2), pages 21582440221, June.
    3. Saghir Pervaiz GHAURI & Hina QADIR & Rizwan Raheem AHMED & Dalia STREIMIKIENE & Justas STREIMIKIS, 2022. "The Exports Performance of Pakistan: Evidence from the ARDL Cointegration Analysis," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 150-168, December.
    4. Chama CHIPETA & Daniel Francois MEYER, 2018. "Trade Openness, FDI and Exchange Rate Effects on Job Creation in South Africa's Tradable Sectors," Journal of Economics and Behavioral Studies, AMH International, vol. 10(4), pages 197-212.
    5. Chama Chipeta, 2022. "Analysing The Employment Effects Of The Exchange Rate, Foreign Direct Investment And Trade Openness On South Africa’S Non-Tradable Sectors," JOURNAL STUDIA UNIVERSITATIS BABES-BOLYAI NEGOTIA, Babes-Bolyai University, Faculty of Business.
    6. Lina Cardona-Sosa & Fredy Gamboa-Estrada & Jesahel Higuera-Barajas, 2019. "Cheap employment: ¿Aumenta el empleo manufacturero con una depreciación real?," Borradores de Economia 1062, Banco de la Republica de Colombia.
    7. Kim P. Huynh & Yuri Ostrovsky & Robert J. Petrunia & Marcel C. Voia, 2017. "Industry shutdown rates and permanent layoffs: evidence from firm-worker matched data," IZA Journal of Labor Economics, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 6(1), pages 1-31, December.

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    JEL classification:

    • F1 - International Economics - - Trade
    • F3 - International Economics - - International Finance
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor

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